Film incentives must be reasonable

March 2, 2011

The crafting of the state budget is an exercise in economics, not emotion.

I have received hundreds of e-mails from passionate supporters of the film industry, pleading for the Legislature to leave New Mexico’s generous film subsidy unchanged. Almost all of those contacting me appear to believe that this incentive program merely returns to the film production company a portion of the taxes paid into the state’s coffers.

However, it’s important to understand that the rebate is not a portion of taxes paid… it is a portion of production costs incurred. So the math looks like this: If a film company spends $100 million here, the taxes received by the state on these expenditures is roughly 8 percent (or $8 million). However, the rebate paid out of the state’s general fund equals 25 percent of the eligible expenditures (or $25 million). This represents a net loss to the state of $17 million.

If only five such projects were filmed in New Mexico in a given year, our net loss would total $85 million. Now, while I recognize that such productions do create jobs (some temporary and some permanent) and that they do provide business for New Mexico vendors, they still require us to spend a potentially unlimited amount from the same general fund that must also pay for education, public safety, and other essential services for state residents.

So, the recent bipartisan compromise endorsed unanimously by my colleagues and I on the House Taxation and Revenue Committee demonstrates that New Mexico is still willing to provide incentives for film production in our state but sets a reasonable limit on the annual negative impact to the state’s general fund.

Given the fiscal crisis we have faced for the last few years, such moderation is more important than ever.

We must not be blinded by our passion, but instead honor the public’s priorities.